Oct. 31 (Bloomberg) -- GlaxoSmithKline Plc, the U.K.’s
largest drugmaker, reported third-quarter profit and sales that
fell more than analysts estimated as revenue declined in Europe
and a vaccine program in Japan came to an end.

Earnings excluding some items decreased 15 percent to 1.97
billion pounds ($3.17 billion), or 26.5 pence a share, London-based Glaxo said in a statement today. That missed the average
estimate of 28 pence from 14 analysts surveyed by Bloomberg.
Sales declined 8 percent to 6.53 billion pounds, falling short
of the average analyst estimate of 6.66 billion pounds.

A 9 percent sales decline in Europe, where governments are
cutting prices on drugs, is prompting a “comprehensive review”
of the company’s business in the region, to be outlined next
quarter, Glaxo said today. Glaxo reiterated its sales and profit
margin forecasts for the full year, saying revenue will be in
line with 2011 levels.

“On Europe, in the short run, over the next quarter or
two, I see no cause for optimism,” Chief Executive Officer
Andrew Witty told reporters in a conference call today. “Could
this be the new normal? I very much hope it isn’t.”

European countries cross-referencing their prices is also
creating a “pan-industry phenomenon,” Witty said.

Sales in Japan also fell 25 percent after the end of a
program that introduced the cervical-cancer vaccine Cervarix.
Revenue from flu shots Fluarix and Flulaval fell 13 percent as
fewer doses were sold in the U.S. and Glaxo lost a tender in
Europe.

Shares Decline

The shares fell 2.4 percent to 1,386.50 pence in London.
The stock has lost 1.8 percent this year including reinvested
dividends, compared with a 14 percent return for the Bloomberg
Europe Pharmaceutical Index.

Glaxo raised its dividend 6 percent to 18 pence a share.
The company still expects to repurchase between 2 billion pounds
and 2.5 billion pounds in shares this year. Buybacks next year
will probably follow a similar pattern to 2012, depending on
whether other opportunities arise, Witty said.

The company won’t rule out “occasional bolt-on
acquisitions” in consumer health care and in emerging markets,
while the general level of interest in purchases is lower
compared with recent years, he said.

Drug Pipeline

This week, Glaxo’s ViiV Healthcare Ltd. joint-venture with
Pfizer Inc. agreed to buy the rights to HIV treatments the unit
has developed with Japan’s Shionogi & Co. The most advanced
medicine from the collaboration, dolutegravir, will be submitted
for approval by the end of the year, it said.

Glaxo said in July it agreed to buy Human Genome Sciences
Inc. for $3 billion in cash, winning control of its U.S. partner
on the Benlysta lupus therapy. Benlysta sales doubled to 20
million pounds in the quarter.

Glaxo has released late-stage clinical trial data from 12
compounds this year, with results on migalastat for Fabry
disease, the Mosquirix malaria vaccine, and drisapersen for
Duchenne muscular dystrophy due by the end of December.

Glaxo plans to submit a once-daily treatment for smoker’s
cough to regulators for approval by the end of the year, and a
separate drug for respiratory disease, to be marketed as Relvar
or Breo, was submitted in the U.S. and Europe in July.
Albiglutide for diabetes will also be filed by the end of the
year, Glaxo said today.